Tim interviews Grant Long, Co-Founder of DONGTU, the largest micro-content platform in China. Brands are able to use DONGTU as their primary channel to distribute content across thousands of Chinese apps, making their branding relevant in Chinese mobile internet culture. DONGTU powers branded GIFs from over 1,000 IP partners across 3,000+ Chinese app integrations, reaching 24 billion+ monthly views and 250 million+ daily searches. Grant shares insights on the ubiquitous GIF culture in China, advantages of the GIF ad format, building an ecosystem for content aggregation and distribution across Chinese apps without isolating partners, educating advertisers on new metrics, partnering with international brands and more.
- B2B2C business model – enabling brand engagement and connections between brands and ecosystem players such as Tencent and Alibaba who have tons of apps. DONGTU integrates deeply into apps’ user experience natively and provides users a way to search and share micro-video content
- GIFs are used more frequently, have higher coverage, and compared to video don’t need to be opened because they’re always looping: they do not need to be opened and have lower psychological acceptance costs and conversion costs. For brands, these characteristics create a very high value.
- Convenience is everything. There's a significant dropoff in usage of this type of content when not placed in the right context of an app experience.
- GIF as an ad format is in early stages: currently in the phase of educating brands and advertisers, who try to fit GIF ad formats within traditional success metrics. Adoption will be predicated on standardizations of measurement.
- With DONGTU, partners (largely global partners in sports, media, and entertainment) see an ability to work with one channel to reach Chinese users across thousands of apps and to start seeding their content organically into those apps via GIFs.
- In China, licensed digital goods for retail sales don’t perform well, in most cases partnership value and upside is actually in the engagement and giving the content to the users for free
- DONGTU looks to monetize beyond content served. Because a vast majority of integrations are through their SDK, DONGTU captures user data and GIF interaction data within a conversation. They’ve build a web of social networks and interactions across the thousands of apps they’ve integrated with and look to better monetize this data set.
- The “send” metric within a private social context is a new novel metric for GIF ad formats
- DONGTU currently delivers close to 3 billion DONGTU everyday in China and millions of searches every day.
Edited by Tim Chen. Images courtesy of DONGTU.
[Editor's note: this interview has been edited and condensed for clarity. The opinions expressed in this article are Grant's own and do not reflect the views of DONGTU; Tim Chen is Head of International Product at Mobike and Partner at TheHarbingerChina]
Hey everyone, welcome back to the Harbinger China, today im joined by my friend Grant, and I have the pleasure of introducing him and his company, DONGTU. So before we get started we’d love to learn a little more about your background and how you came across this opportunity in China. I know when we last spoke you mentioned you were working with IP licensing businesses and it’d be really good for our listeners to learn about how you transitioned from that and took that leap of faith into China.
Grant: So my name is Grant Long. Long actually means dragon in Chinese. So when people ask me why I ended up moving to China that's usually what I tell them these days but that's not the full story. So I grew up in Berkeley California, the larger, greater part of the Bay Area during the first internet boom. I think my career as an entrepreneur and the foundation and all elements that make me comfortable in this high risk position kind of started at that time. I think some of that is attributed to being raised in a high school (Berkley High) that really breeds creativity and critical thinking. I think also having parents that were rather non-conformist in the way they raised me – pulling me out of school when they thought it was worthwhile to travel and expose me to the world – contributed as well.
After Berkeley, I ended up at USC down in Los Angeles, and that's mainly where my interest in China sprouted. I was lucky enough to be matched with a roommate who grew up in Hong Kong in my freshman year, and we’ve stayed really close friends to this date. Also my roommate’s family actually moved to Shanghai while we were freshman together, so that was kind of the seed that was planted in which I noticed that there was quite a bit happening on that side of the world, and so I wanted to check that out some day. And as it turned out, after college I moved back to the bay area and started working in the IT space and made a friend as kind of a mentor figure who proposed that we should go on a trip to Asia. This turned out to be my first trip to Hong Kong and Shanghai where I spent a couple weeks there, and I was really floored by the rate of change and futuristic nature of Shanghai specifically, and even at that point of time around 2012, I started thinking and looking seriously into employment opportunities in China.
But ultimately I got pulled in a different direction and instead decided to move to New York City and join two close friends who started a very early stage startup. I joined as head of product for that business, so it was only three of us. The company was initially called TextPride but was later rebranded to Swyft Media, and this was the second factor that led to my time in China. Swyft was the first company that was focused on bringing brands into the mobile messaging experience. It initially started with the basic idea around the fact that consumers enjoyed emoji but there was little range in the types of emojis people could send. Remember this was back in 2013/2014, very early on in the mobile messaging explosion, so we took that trend and wanted to look to license branded content. We then formed partnerships with mobile messaging apps to bring a wider variety in the content people could send in expressive ways. Ultimately, we focused on digital stickers, and so we landed licensing deals with Disney and other massive entertainment entities across the world. On the messaging side, we formed partnerships with everyone from Line, Kakao, Wechat, Facebook Messenger, Vyber, and Kik, so I'd say that's where my interest in messaging came from. Swyft was acquired in 2015 by a company called Monotype.
So after that acquisition, I started to travel out to visit with partners more frequently in Asia, some of which were mobile OEMS in the region. It was during that period of time that I really started to delve really deeply into this opportunity, which was an opportunity to bring content and brand engagement into mobile messaging. So my conclusion was that this was going to be huge everywhere in the world, and that there was a particularly unique opportunity to be taken in China to help create value in this area just because of how big the audience was in messaging. Ultimately, I ended up being connected with some people that ended up being my partners in DONGTU. We formed a relationship over the course of a year keeping in touch and talking, so eventually I approached them with the idea to build this company in China and I ended up moving here in 2016 to work on that.
So DONGTU means moving picture in Chinese but what is DONGTU? Tell us about it and what it looks and feels like.
Grant: We describe ourselves as the largest micro-content platform in China. I'm sure most of the audience today already know how different the Chinese internet ecosystem is from the West. It's also massively engaged – there are billions of users messaging on Wechat, but there's also people in tons of vertical-based apps or competitive apps to Wechat, whether it be dating, business communication, shopping, group buying apps, etc. So what DONGTU does is partner with these apps and have both SDKs and APIs that we integrate deeply into their user experiences, specifically in communications or maybe commenting, and we actually provide a sort of search engine for users to find micro-video content to send in their chats to express themselves or to share cultural relevant content like memes. I’d say in the West, some corollary apps would be Giphy and Tenor, which was acquired recently, in which both companies index a huge library of visual content that they then embed into larger Western apps for people to share. I think that kind of the way that were positioned is that we’re in the private social layer of the Chinese internet but this layer is actually by far the most used mobile function, even more than watching videos or scrolling through a feed because people are always constantly checking their messages from friends and family. And what we are is the most native form of search and media for that environment, so that's the opportunity we pursue.
Market Landscape and Overview
Private social isn’t a term you really hear in the West, and that’s because in China, much of the social messaging is dominated by Wechat, which is organized around community groups. When users open up Wechat messaging they can tap into DONGTU’s archive of GIFs. You mentioned you are building a complete ecosystem from distribution to content aggregation. So your business model is B2B2C. What is the partnership and relationship like with these distribution players? Are they interested because they want to do advertising tracking or purely for the beneficial gain for their users?
Grant: You’re right to describe us as a B2B2C model, where between us and the consumers that we interact with, there's some kind of partner application within which we integrated SDKs and APIs. We actually have our SDKs integrated in over 3,000 apps in China, so people in these apps are actually opening UIs that are controlled by our code but are taking place in 3rd party channels business partners. I would say that for those apps first and foremost they are looking for a way to create a richer, more vibrant user experience for their user base. So they want to have many reasons for people to keep coming back and opening their apps, and wish to make it easy for people to communicate and express themselves, more particularly in their social functions and communication functions, but in a way that's simple. What we provide is actually a way to express nuances such as humor and also short handed expressions in their messages.
First and foremost for the apps that we work with such as Wechat, QQ, Taobao and more, they're looking at us as something that will improve their user experience, but with many of our partners, we’ve moved into a second phase where were working with them on co-monetization efforts and being a revenue driver for and with them, and that's ultimately our business model – enabling brand engagement and connections between ecosystem apps like Tencent and Alibaba who have tons of apps – social, media, gaming– and we’re the type of media unit that fits into a social layer that spawns different connections and down the road. We’re looking at ways to make content clickable and drive traffic to these apps.
I think how DONGTU is native and natural is a key advantage of the GIF format. For folks who may not be too familiar and think GIFs are just a Millennial or Gen-Z sticker; if you think about a GIF, at their fundamental level they are used more frequently, have higher coverage, and compared to video they don’t need to be opened because they’re always looping. They do not need to be opened, and have lower psychological acceptance costs and conversion costs. For the brand side, these characteristics create a very high value. You’ve seen GIFs via Swyft in a Western ecosystem and now via DONGTU in China, how do Chinese users engage with GIFs? What is it about Chinese internet culture that makes DONGTU work so well?
Grant: So mentioning my time at Swyft, we ultimately did do business in the GIF space but our bread and butter in the beginning was mainly digital stickers, and I think that the digital sticker culture has not thrived anywhere nearly to the extent as it has in Asia where everyone sends digital stickers in their messages across all ages from pre-teen to grandparents. It’s definitely a pervasive experience that's shared across the culture, and so with GIFs I’d say the evolution in this region has really been from the perspective of expressions first, and we’re now influencing the evolution of GIF usage more towards a media format that can convey more information.
I’d say in the West, the usage of GIFs sprung more from Internet meme culture, not to say that’s not a big thing in China, but in the US and Western internet on places like Tumblr, where people created GIFs, that was really the genesis of the GIF experience. At one point it was a pretty terrible user experience where people had to save libraries of GIFs and had to send them through emails and different communication context. Ultimately it was Giphy that really spearheaded this in making it convenient to search and access content for self expression. I think that’s a little bit of the historical divergence of the GIF usage, but now I think we’re moving back to where GIFs are both expression oriented and summary form of video content for the mobile context. People have very short attention spans – they’re opening their phones for a 10 second elevator ride, so GIFs are kind of the perfect medium to get some succinct messages across. Something were working on is enabling a GIF preview for videos that click through to longer form content.
Users and Use Cases
That really ties into the additional use cases you mentioned you are exploring with DONGTU. One piece of background culturally is that many people in China often don't prize showing emotion, so in terms of self expression, GIFs allow users to express emotions beyond what they would probably feel comfortable doing in the real world with friends, so that’s a user use case. As you think about new revenue models, how do you balance this with managing user experience?
Grant: We definitely haven't seen tension, and I think that's partly because we’re not at scale with a lot of these initiatives yet. We’re definitely testing, but because of the fact that we’re a B2B2C company, a lot of what we work on is with the partnerships that we have, so we may be working with the product team that runs the messaging function on a dating app in China, but ultimately we’re going to test along with them if something is beneficial to their user base and also if something can drive revenue. I think something that's important about this type of business that we run here is that convenience is a significant factor. We get this question asked by different brands and content partners that we work with on why should we work with you when we can create GIFs ourselves, but it’s important to know that there's a significant dropoff in usage of this type of content when not placed in the right context of an app experience. And so when people are in a communication app and we give them a 1 or 2 click ability to access and share content, that convenience is everything. So as we roll out new functions that support our business goals, we’re always keeping in mind how things can fit naturally into user experience and improve it. And when you talk about Giphy and some of the things they are working on, I know Alex, their CEO, always talks about the fact that this really should be a media format that's beneficial to the user experience. We also wholeheartedly believe that and definitely look towards advertising as our key revenue driver, but we want it to be a type of advertising and engagement that actually improves user experience, where they have positive feelings about rather than a kind of interruption.
So your ultimate customer, because you’re driving revenue from advertising, are these brands who want to pay for content that is convenient and natural that they can insert into user conversations. In the US it feels like advertisers don’t understand GIFs. Is it easier in China to sell to advertisers, and do they immediately understand the value of GIFs as an ad format?
Grant: I would say that it’s definitely not easier here, and for the entire industry spanning from some of the Western companies to ourselves, we’re still in the educational phase with brands and advertisers of why this is really going to help drive business. But the usage of stickers and GIFs is a universal experience in China versus the rest of the world where it may appeal more to the younger demographics. I think that ultimately a lot of business decision makers here recognize that the universal aspect of GIFs here is valuable, and can see the value in connecting their brand to the experience.
I think when you talk about ad adoption, one important factor is creating a kind of standard that people can use for everything from creative to measurement of success, and one thing that I’ll point to is early last year when Google acquired Tenor, a large global GIF company. And I think when you talk about driving standards and things into the digital media environment, Google is the largest digital advertising company in the world, so they have a significant ability to push things forward. We are in a great position here in China where because of localization challenges as well as things like government regulation of the internet, we feel very isolated from competition here, and we think actions happening in the West will help the overall industry.
Chinese internet ecosystems definitely feel like a different world from the West. So you’re still in the educational phase with branded ads and you’re looking to set up standards. You recently partnered with NHL (National Hockey League) and PSG (Paris Saint Germain Football Club), both of which are foreign brands, to help them target their Chinese fans. What were some considerations in terms of the partnership? How are they able to measure the effectiveness of this? What was the sell to bring them on board?
Grant: So a lot of what I deal with on a daily operational basis is helping to bridge our platform to foreign entities. China, despite the fact of the brewing tensions of the trade war, is still recognized by companies around the world as a key growth market for them, and that’s particularly prevalent in media, entertainment, and sports, where what they are selling is not a physical product, but is digital and cultural. When they look at our platform, they see a huge benefit in partnering with DONGTU, because although China is a big opportunity, it’s also very challenging to have a presence across the entirety of the Chinese digital landscape. So many brands may have a presence on Weibo or Wechat with an official account, or more recently with the Bytedance companies and products like Douyin. But with DONGTU, they see an ability to work with one channel to reach users across thousands of apps and to start seeding their content organically into those apps, and especially if you’re some kind of brand that looks to be culturally relevant, such as someone in sports, media, entertainment, but also big Fortune 500 consumer brands that want to have a share of voice and have their brands be recognized. It starts with just impressions and driving engagements across these different channels that we work with, but down the road, things that we’re working on that are already live on a number of our partner apps are the ability to click through to different experiences so if there’s a sporting event or a music event then maybe clicking through to a ticketing page or a more information page or different parts of the app. I think that’s something that, when you look in the West, that’s something really interesting to think about: If there were a more structural relationship with someone like Giphy and Facebook, where you look at instagram stories where Giphy distributes a lot of GIF and sticker content that people use, it’s interesting to think about the idea where that content could click through to pages or experiences within the ecosystem. And that’s what we’re working on with our clients in China.
It’s definitely valuable to establish a comprehensive and holistic coverage of potential fans through different mediums in China. Do you see most of your partnerships coming from overseas or in China? I know you have in the past partnered with big name Chinese shows such as Rap of China.
Grant: I would say at this point we’re in a very early stage in international collaborations, and that’s partly because if you look at our business I’m the only Westerner in the entire company, and so our ability to form those connections and actually service a client base is not as easy as it is to reach out to and work with clients locally. We work with thousands of local shows, celebrities, film releases, and musicians in China. We actually do a lot more in that field. you mentioned Rap of China, we work with Sing China, The Voice, TV dramas, and basketball shows, and we even have a studio here at our office in Shanghai where we’ll bring celebrities to custom create content to promote upcoming shows and albums. We’re very active in terms of a client and partnership base in China, but we’re also obviously excited about opening up and working with international clients. So hopefully we’ll see more news about big international brands launching on DONGTU and driving engagement through our channels in the upcoming months.
International brands make sense, like when the NBA launched into China. When you think about getting that IP licensing from foreign brands is it a conversation where you say hey we want to license your digital content and turn it into a GIF?
Grant: I think the term license is interesting. For our business, although we do receive the rights to the content we distribute for our different clients and partners, I’d say it’s very different from what I worked on in the early days of Swyft where we were actually going out and basically the deals we were striking were very similar to merchandise licenses where we strike the license to sell content through different channels. Ultimately one of our learnings was that maybe it is applicable to specific markets such as Japan with Line where they do a lot of retail sales of digital goods. But in most cases the value and the upside is actually in the engagement and giving the content to the users for free – driving the engagement for those brands via free distribution to a large user base. For our partnerships, they're either transferring content to us kind of in a value exchange where we don’t pay them but we provide free engagement, or in many cases they pay us to drive a certain amount of sustained engagement or on a campaign basis for a one-time event.
Product and Business Model
Help us understand the GIF business model. For Giphy, they monetize expressions; it’s cultural currency – it’s relevant, short-form, generally 6-second looping GIFs. For DONGTU, can you share more about how you currently monetize, how you measure engagement as well as what matters in terms of engagement? This space feels dynamic.
Grant: For DONGTU, there's definitely a lot of overlap in some of the ways we look at monetization and how Giphy and Tenor do. So, at its core, it’s driving engagement for our clients on our platform, the way we measure that would be through how many of the pieces of content they're actually serving into user experiences. I think in the West, Giphy and Tenor have primarily API driven businesses, meaning they don't necessarily have a native SDK in their partner apps but it’s a communication between the two apps. The easiest information to gather is from their CDN – how many of these images they’re serving into a user’s app. And there's certain signals that can be captured through those integrations, but it’s not necessarily rich with data. For us, because the vast majority of our integrations are through our SDK, we capture a lot more data both around the user information as well as was a GIF not only viewed but was it sent in a conversation. So we know who was the person that received that content. Additionally, we can see all these interactions and who's involved and therefore we build this web of social networks and social interactions across thousands of apps in China. We have a pretty compelling data set from these device IDs and IP addresses too, and with pure data and insights we can try to leverage this into generating revenue.
In terms of some of the things that are very much in beta mode but ramping up quickly is the level of actionability and intractability in our content. At its most basic form and in the earliest days in this industry, a GIF was a file, and has been around for decades. It’s ultimately not that great of a file type: it is large, has low resolution, but it does have inherent properties of autoplay and supportive environments that made it appealing, so we’re actually pushing through our platform because of our SDK and the fact that we can control rendering in many of our apps, more towards a GIF as actually rich media. So in a second generation a GIF may actually be an mp4 or a piece of video content, that can be longer, better resolution and smaller file size. But then, the later iteration of that would be to interact with content – can a user click on a DONGTU and open up a webview that’s triggered from the experience? That’s where we see a lot of interesting overlaps and synergies between one of the huge trends in China with mini programs. Wechat has launched their mini programs, which are basically apps within apps, and now we’re seeing widespread adoption and innovation in this sector both in the Tencent ecosystem and also amongst their competitors, and so one of our really exciting opportunities is that we have exclusive relationships with Taobao and Alibaba, and we’re a large partner to them in their mini programs and were actually going to be driving engagement through our GIF integrations. We drive probably over a billion engagements of our DONGTU in the Alibaba ecosystem every single day, so being able to attach that to some interactive app experience that's built on top of that is super powerful.
You mentioned engagement quite a bit, for brands not familiar with a GIF ad format, if they’re thinking about advertising through mini-programs, when you say rich format do they think of this as you guys are similar to a TV-channel where within the third party app, when you key up GIFs to send, they have the real estate up top where it’s relevant to users? So they can have their stickers “air” at a time that match their tv show airs. Is that how brands think about GIF ad formats within your ecosystem?
Grant: So, earlier in our conversation I talked about how we represent two very important things inside communication, one is search and one is media. When we talk to brands, we actually have commercial models and pricing models that relate to both of those more traditional digital business areas, and so if a user opens up a DONGTU experience in Taobao for example, they’ll see trending content immediately that is most relevant for them based off of algorithms and editorial efforts from our creative team, and because of the convenience factor, many of those GIFs are actually the ones that are selected to be sent. So if there's a brand that's really hoping to have engagement for the brand or product, then we would try to build a model for them and that's going to drive tons of impressions as well as have the likelihood of people sharing content. So there's a lot more to it than just seeing content, since there’s that interactivity of sharing that feels like brand endorsement. There's another model that's more similar to the search business, for example if McDonald's wanted to target a term like “happiness” or “breakfast,” we can take their content and place it to target different search terms for contextual targeting. So this McDonald’s example can be used to show how powerful GIF advertising is: if someone is texting their friend in the morning telling them their hungry, and we place the McDonald's GIFs in that texting environment, we’re relevant in the right time and context – maybe to even plant a seed in the user’s head to possibly go to McDonald's.
When we talk about engagement, are you seeing that a lot of your partners both in China and abroad taking notions of how to measure engagement from other channels and slapping those same kind of expectations onto the GIF format?
Grant: This is something that I’ve run into even in my early stages at Swyft. Let’s say you’re an ad agency that's primed your client to think about a campaign's success based on traditional metrics. So even if what we’re offering is not completely aligned with that, an impression that is just a simple view from someone browsing a feed is a lot different than an impression that is a friend sharing and sending content in this personal communication context. But ultimately, the advertising/marketing context in business is very complex, with some of our clients, they will have a much more traditional way of evaluating success and would want to do things like billboards, magazines, tv shows, and would just want us to help in fitting into a key metric. I think where we have a lot of success is helping educating brands in marketing and advertising; for example when you market on Facebook you don’t look at just impressions you think about comments, follows, likes, and maybe some direct response outcomes. That’s something you should be building into your evaluation for success on a platform like ours.
Facebook invented the like, Twitter invented follows and retweet; is there a specific metric to the GIF industry that is a novel way of measuring success?
Grant: I definitely think sending, a share that’s happening directly in a private social context, is a very important part in measuring success. That’s not a mainstream description, but this is the most used function on mobile internet. We saw this manifesto written by Mark Zuckerburg talking about how the future of Facebook is revolving around the private social context. We’ll see that posts and shares won’t be to a feed but an increasing focus to private social context communication with friends, family, one-on-one, and one-to-group. So as brands are looking to have more presence in a channel, they should be paying attention to this. So when a user seeks out GIF content and shares it directly to another user, that is a very unique and powerful metric.
Intuitively when a GIF is shared within a relevant context, that has stronger brand power, value and engagement vs. a random Youtube link. Perhaps a better word is an organic share as you’re still tackling this education phase. Do you feel that GIF companies as a whole are undervalued in the sense that advertisers are paying equal or even less in terms of CPM or CPA because they don’t understand this product? When do you expect this to change?
Grant: From my perspective, I think that all of our businesses are undervalued, but obviously I have a vested interest. Back in New York with Swyft, when we were pitching the importance of mobile messaging to brands, they were still actually thinking about desktop ads in 2014 despite the fact that we were six or seven years into the smartphone era. They were thinking about how to put banners on desktop. So we were educating them not just how to advertise in messaging but on mobile in general, and it takes time for those things to change. I think in the past 1-2 years, advertisers have begun to aggressively adopt mobile video advertising and so I think that we’re a further iteration of that. As people become more aware of the importance of this social context that is more private, they may ask how they can transfer a campaign from Youtube and take a pre-roll content and bridge it into a highly active and powerful environment of the private social sector, and that’s why I think Google acquired Tenor. I think why Google did that is because they know this is important context for advertisers and now they’re well positioned to help brands who go into Adsense and spend money on Youtube to also spend money on Tenor. That’s going to create a lot of waves. On the China side, we’re collaborating with some of our biggest partners – Tencent, Alibaba, Meituan – on how to not only drive engagement but also drive significant revenue into these channels, and it’s both making this content available and educating large brand advertisers. And also with advertisers like Alibaba who work with many vendors, making this available for their vendors who have small ad spends through vendor portals.
Competition and Opportunity
Sounds like a great arbitrage opportunity. If i were a brand looking to acquire users online, it is expensive to do so on Google or Facebook for desktop and mobile ads. At the same time for new formats like Giphy and DONGTU who may deliver better engagement, the cost is cheaper because the format is not well understood and undervalued. What does the competitive market look like in China? Are there a lot of copy cat players? How fragmented is the space?
Grant: When you look at the direct competition in the China market, we are very confident in our positioning in China. Both myself and my partners have been working in this space of expressions and new media for engagement for a very long time. We have deep partnership connections as well as a lot of learnings and experience from our years in this industry, so we are confident in creating something huge, which is something that is coming along well considering we are currently delivering close to 3 billion DONGTU everyday in China and millions of searches every day. As you know as someone working in the tech ecosystem in China, there’s certainly a copycat culture here. When Giphy was raising funding in 2016, a ton of copycat companies whether it be new companies or old companies pivoting that sprung up. So in the earlier days that sea of competition was something we were dealing with – how do we differentiate ourselves? But what we’ve seen is that over time the best companies rise to the top. There are a few other players who work with tens of apps in China whereas we work with over 3,700 apps with our APIs and SDKs and have deep strategic partnerships with Tencent and Alibaba. Recently we’ve been working on a digital avatar product for Tencent’s QQ similar to bitmoji as a native function to demonstrate the value we’re bringing. But competition helps to drive you and to be creative and aggressive, but in this particular B2B2C field, too much competition makes you lose leverage in the middle B, the partner app ecosystem, where they have alternatives. For us, we feel like we have the leverage we need to drive our goals with our partners. However, in the United States I feel like that’s a risk factor for Giphy and Tenor is that Facebook can sit in the middle and play them off each other. So that’s an area we feel best positioned in this market on a global landscape.
How do you think about where that value chokehold point for you guys when it comes to dominating the market, is it really growing faster than everybody else and showing strong stability to distributors or is it just having exclusive rights to a lot of branding that nobody else can get their hands on?
Grant: We definitely see a certain level of a flywheel in our business, where we have two very important sides to the company: one is content acquisition and the other is content distribution, and they play off of each other where the more good content we have then the stronger our ability to sign distribution deals with partners, which plays back into content acquisition. This loop accelerates. We talked about NHL, PSG, international partners that are starting to work with us; they probably weren’t willing a couple of years ago but now that we have this fast moving flywheel, we have these huge brands wanting to become part of our ecosystem. And with the better content we get the more holdout brands to realize not only to integrate this type of product but to integrate this company because they have better and more exclusive content than other players.
Then the last piece that could be the lynchpin to the flywheel is monetization. Once we reach more scale with monetization efforts, we’ll actually share some of that revenue with some important players on the distribution side of our ecosystem on the distribution side where we’re co-selling engagement campaigns with our partners. With content key partners, some of them could be making money through access to consumers via our ecosystem.
What kind of metrics do you look at to show you have market traction and growth? Do you look at revenue from advertisers, content partnerships signed, and distributors signed?
Grant: We always want to ensure we’re growing on the content and distribution sides. On the distribution side we’re lucky to have products that are integrated by the small and middle apps automatically as users expect this as a given. So when they go look for solution providers they look for leaders and they find us. We still pay attention to the large apps from a business development perspective. We work closely with Tencent, we’re deeply embedded in QQ and GIF search in Wechat but not yet in their keyboard so how do we make sure this is super important for them where it can most benefit consumers? On the content side where the more people are using this on apps they’ll seek out a service like us. On the international front it’s just educating the market we exist. I would say there’s significant adoption from foreign brands with foreign services, but letting them know we’re their solution for China.
As you grow, what do you look for in a strategic partner or investor?
Grant: In terms of strategy investment, in China, many large companies chose to fundraise from BAT (Baidu, Alibaba, Tencent). But that’s something we need to tread carefully. We work with many of them already and it’s a risk to us to show favoritism because that could exclude us from the other set of services or ecosystems. If we raise from Alibaba then Tencent could say you’re an enemy now. That’s important to consider in China. If we can raise from multiple players that would be ideal. In terms of other types of strategic investment, we have raised from Cheetah Mobile in our Series A – they’re relatively neutral when it comes to big players. We’ve considered investments from media entities in China. Another factor in China is the government, like many startups in tech we do have lots of early fundraising from government funds and we’re doing some exciting things with state-owned media on how we can help them better communicate with their readers and audiences using DONGTU and rich media. So that’s maybe more unique to a Chinese company than internationally. In terms of international strategic partners, we’re always aware of how closely guarded the government is with any large scale media entity on the internet in China. There’s a reason why Facebook and Google aren’t operating here so that’s something we’ll have to weigh if they’re interested in investing in us.
Awesome, this has been super insightful and I wish DONGTU the best of luck!